BMW AG

The stable outlook reflects our view that BMW will continue to expand its competitive EV line to build its EV market share under its main brand such that it is equal to or higher than its current passenger car market share across its key regional markets. Supported by pricing and ongoing cost-efficiency measures, we forecast that the group will be able to maintain adjusted EBITDA margins well above 13% and sustain adjusted FOCF to sales at least at 4%. We could lower the rating if intense competition in one of BMW's key regional markets in Europe, China, or the U.S. weakened its market shares in key segments, including for EVs, or resulted in pressure to materially step-up investments to keep

...Supply chain risks are set to remain the most significant short-term issue for BMW and its peers. In the first half of 2022, BMW's auto production slumped by 9.7% year-on-year as the company grappled with a variety of supply chain disruptions plaguing the wider industry, notably an undersupply of semiconductors, fresh pandemic-related lockdowns in China, and temporary component shortages linked to the Russia-Ukraine conflict. This sent BMW's last 12 months (LTM) production volume as of second-quarter 2022 back to about 91% of 2019 levels from about 100% as of the second quarter of 2021 (see chart 1). We foresee a gradual easing of supply bottlenecks in 2023, mainly thanks to some capacity expansion by chipmakers, and slowing chip demand from other sectors combined with modifications to auto OEMs' chip sourcing that should improve the amount of chips allocated to the auto industry. That said, we think lead times for automotive semiconductors are still about 3x-4x higher than the long-term...

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